This document summarizes a book about managing change in IT outsourcing from the service provider perspective. It discusses research showing that providers often struggle with sustainable performance for clients over time. The book examines factors that influence sustainable performance, such as organizational structure, capabilities, and adapting to changing client needs. It presents findings on issues during the transition phase, benefits of customizing structures while standardizing back-office functions, the importance of client knowledge, and keys to dynamic fit and long-term adaptability. Measuring holistic performance over multiple years and including the client perspective were found to positively impact sustainable results.

1. Book publication: November 2012

2. Dr. Albert Plugge
Introduction
• Delft University of Technology: Senior Research Fellow
• International research and education (lecturing).
• My book ‘Managing Change in IT Outsourcing’ specifically addresses
the Service provider side as part of outsourcing arrangements.
• TopTech: Module manager Strategic Sourcing
• Executive Master of IT Management
• KPMG (formerly EquaTerra): Sourcing Practice
• Sourcing Management and Governance
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Website: http://www.palgrave.com/products/title.aspx?pid=594852

3. Service providers are struggling with their performance
• Extensive scientific research with regard to IT outsourcing.
• E.g. relationship management (Kern and Willcocks, 2002), contract
management (Beulen et al., 2006), hidden cost (Barthelemy, 2001).
• However, literature shows that the provider perspective remains under-
researched.
• During the period1995-2005 only 16% of the research reflects the provider
side (Gonzalez et al. 2006).
• Research problem:
• Previous research revealed a recurring problem related to providers, a lack of
sustainability in performance towards clients.
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4. Factors that may influence a sustainable performance
Changing client circumstances:
Sourcing strategy, Innovation and Flexibility
Organizational
structure
Decision-making,
Set of processes,
Capabilities level of hierarchy and
procedures, assets,
degree of
knowledge and experience
horizontal integration
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5. Research approach
• Literature study.
• Preliminary research with regard to client developments.
• Five clients acting in various industries: Banking, Telecommunications,
Chemicals, Manufacturing and Retail.
• Selection of three service providers.
• Domestic provider, Offshore provider, Global provider.
• Qualitative research:
• Case study of a Provider-Client arrangement based on a retrospective
approach.
• Quantitative research:
• Survey (questionnaire).
• Empirical testing of the research model.
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6. Findings
Transition phase
• Sourcing performance issues started during the transition phase.
• Strong opportunistic behavior of the provider as well as the client.
• Closing entry of contract negotiations.
• Resistance occurred with regard to the integration the multiple IT service
components. Influencing factors are:
• Resistance on an organizational level. Source: Plugge,A., Brook, J. (2012) ‘Understanding
resistance in IT outsourcing: A service provider
perspective’, Springer, Heidelberg
• Responsibility of organizational tasks.
• Coordination of labor.
• As a result of a dispute with their clients, the providers were forced to
change their organization and capabilities.
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7. Finding
Organizational structure Dimensions
• A high degree of standardization of both IT Services and the
organizational structure (one-size-fits-all) does not work.
• We find that a highly standardized organizational structure result in a
decrease of performance and lower client satisfaction.
• Case studies show that some degree of ‘customization’ is inevitable.
• Adaptation will result in an increase of transaction cost, however, delivery cost
are decreased.
• Customization of the organizational structure result in a higher
performance.
• Determinants are: horizontal integration, hierarchy and decision-making.
• Customize the front-office and standardize the back-office.
• Establish a dedicated client-team to coordinate the delivery of IT Services.
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8. Findings
Sourcing capabilities
• Some sourcing capabilities can only be developed over long periods of
time and is not always clear how to develop these capabilities in the short
to medium term.
• Introduction of a new secure Hosting environment strongly affected the
process reengineering capability of the provider.
• Multiple IT processes (e.g. requirement mgt, compliancy, security) related to
the delivery of IT Services had to be adapted.
• Regarding the main research, the offshore provider outperformed in
adapting their capabilities.
• The provider applies a process-oriented approach.
• Knowledge of client’s business processes is key.
• Market segmentation results in a higher client satisfaction rate.
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9. Findings
Dynamic fit
• The initiation of a dynamic fit is based on:
• The Governance capability and Organizational design capability
• Both capabilities lack attention at the provider under study.
• A lack of a proper client account strategy.
• Long-term sourcing strategy of a client is conflicting with the short-term
thinking of the providers under study (quarterly financial reviews).
• As the strategic value* of a client increases, providers will pay more
attention to achieve a dynamic fit .
• *: contract value, contract term, reciprocity, publicity.
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10. Findings
Adaptability
• We find that identifying changing client circumstances and business
needs lack regular attention.
• Specifically: sourcing strategy, innovation and flexibility (resources and
assets).
• During long-term arrangements changes will occur. It is a given!
• Changing client developments can be seen as an opportunity for new
projects and thus revenue.
• Adaptation is not a ‘myth’.
• Provider’s executive management holds the key to adapt!
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11. Findings
Performance
• Managing the fit between sourcing capabilities and organizational structure
influences a sustainable performance positively.
• As a consequence, this requires continuous attention and investments.
• A durable performance over time (vary between 2 and 4 years).
• Increase of client satisfactions and new business (e.g. offshore provider).
• Measuring sourcing performance from a holistic perspective.
• Sustainable performance metrics are a part of employees personal target.
• Include the client perspective to the Business Balanced Score Card metrics as this
model only refer to internal measurements.
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12. Contact details
Albert Plugge
E: a.g.plugge@tudelft.nl
I: www.albertplugge.com
M: +31(6)30 88 94 19
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